Merchant Group’s Report to Lawmaker Triggers Interchange Tussle

A merchant trade group and at least one bank card network are exchanging fire again this week over the fees merchants pay to accept cards. Triggering the skirmish this time was a press release and report prepared by the Merchants Payments Coalition as a follow-up to a July 19 Congressional hearing about credit card interchange. In response, Visa USA accuses the merchant group of “selective denial” and attempting to shift costs onto consumers. The Washington, D.C.-based MPC said it issued its report in response to a request from U.S. Rep. Ric Keller, R-Fla., for more information about the impact of interchange fees during a hearing held by the House Judiciary Committee's antitrust task force (Digital Transactions News, July 19). The release and report dispute several actions or stands taken by the card networks regarding the controversial subject of interchange and related issues involving payment card acceptance. Interchange is the amount of a bank card sale that the merchant acquirer must pass on to the card issuer; acquirers typically assess the full cost to their merchants. The MPC's report makes a number of assertions. One contention is that, while Visa and MasterCard Worldwide say they now post their operating rules on their Web sites, they in fact keep most of their rules secret. Visa forces anyone who wants to see the full set to sign non-disclosure agreements, according to the MPC. Digital Transactions News went to Visa's Web site for merchants and downloaded a 143-page document entitled, “Rules for Visa Merchants. Card Acceptance and Chargeback Management Guidelines.” “What you've seen is just the tip of the iceberg,” says Mallory Duncan, MPC chairman and senior vice president and general counsel of the Washington, D.C.-based National Retail Federation trade group. Duncan says a Visa executive told him about two years ago that the full set is “is about the size of the New York City phone book.” A second point takes issue with purported claims by the card associations that discounts for cash are allowed. The MPC says federal law prohibits bans on cash discounts, but Visa and MasterCard, which don't want card-using customers to pay higher prices, make them extremely hard to offer. And a third disputes what the MPC says are claims by the card associations that they now permit merchants to negotiate interchange directly. The MPC says merchants tell the group interchange rates are non-negotiable. Duncan, however, when asked about reports that some big retailers have negotiated their own interchange terms with Visa and MasterCard, says it's possible some retailers negotiated continued acceptance of debit cards after the card associations in 2003 settled a big class-action lawsuit over debit card acceptance issues. “We're talking here about credit card interchange,” he says. “I don't know of anyone who's negotiating credit card interchange.” In a written response to a Digital Transactions News request for comment, Visa, the largest payment card network, did not address any specific MPC assertions. Instead, Visa vice president Rosetta Jones says the MPC “has engaged in a well-funded lobbying campaign in Washington, D.C., aimed at limiting consumer choice when paying for goods and services. It's clear from the recent MPC announcement that they want to reach into consumers' wallets and decide which credit cards can and cannot be used. This kind of selective denial would leave many consumers embarrassed or confused at the checkout counter. We do not believe the general retail community wants to alienate their own customers like this.” The House antitrust panel has indicated it may hold at least one more interchange hearing, though nothing is scheduled yet. On another front, about 50 merchant lawsuits filed against Visa, MasterCard, and some banks challenging interchange have been consolidated, as expected, in U.S. District Court in Brooklyn, N.Y., according to Duncan. The consolidated action is now in the early phases of pre-trial proceedings, he says.